Update: world famous economist agrees with Paco Enterprises that bankruptcy is the way to go.
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The Senate said "No, thanks" to the auto bailout, but the Bush administration may divert money from TARP, anyway, in an effort to keep the "Big" 3 out of bankruptcy. If nothing else, I believe this gives the lie to the notion that Paulson and Co. had any real clue as to what they were doing when they begged for the original $700 billion; what they really wanted was just a big dollar number which they hoped would assuage people's fears, and which could be carved up and allocated in accordance with the "panic of the week." Now it's not simply to provide liquidity to the credit markets, it's to prop up the inherently inefficient and poorly-managed U.S. auto industry, along with that industry's truculent unions, who apparently believe that it's better for the membership to be permanently out of work than to take a reduction in compensation.
Bankruptcy may make for bad press, but that is mostly due to widespread ignorance of how bankruptcy works. A bankrupt company doesn't just fold up; it gets breathing room and temporary protection from its creditors while it works out a business plan - a real business plan - that affords some reasonable chance of success. In this case, it would also mean going back to square one with the UAW and negotiating a completely new compensation structure - something the union would prefer to more or less put off indefinitely.
Some conservative bloggers believe that Republicans should go along with the $15 billion "mini" bailout, so that the genuine taxpayer blowout gets to happen on Obama's watch, under which (the thinking goes) the Democrats in the House and the Senate will pass another bailout with a much higher price tag. Presumably, this plan will fail to accomplish anything tangible, and voters will blame the Democrats.
Too cute by half, in my opinion, and my patience for even smallish raids on the treasury is exhausted. I commend Senators Shelby and DeMint and other Republicans for calling a halt to this foolishness, and, although their good work is already being condemned by the likes of Dick Cheney (who says it's "Herbert Hoover" time), the Bush administration's economic leadership over the last few months does not predispose me toward placing much faith in that quarter.
Update: Use of TARP funds to support auto manufacturers may be illegal (H/T: Michelle Malkin)
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8 comments:
You're not the only one whose patience is exhausted, and if pushed far enough the taxpayers who pay their mortgages on time and buy cars they can afford will cry, 'Foul!'
If I ever hear another word about fixing Social Security or the unacceptably high cost of the war from a politician I'll write in Mickey mouse on the next election ballot. He couldn't do poorer job than what we've got now.
Grr Argh.
Retread
Bankruptcy is not the bugaboo people think it is. It's painful, but not necessarily fatal. A relative went through one (his own fault, I might add), and he survived.
I'm tempted to stop payments on my house, and send a note to my mortgage company (who was prominently featured in the bail out news, by the way*) to the effect of, "The United States Congress has assumed responsibility for my debt."
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*: And the idiots still keep on asking me to re-finance my house! I'm also tempted to re-finance OUTSIDE this company.
There is only one danger with the bankruptcy route, and I'm sure a pre-packaged bankruptcy can handle this.
GM will chapter first, that's a given. Here is the problem, and it's a very valid one. When GM chapters they will stop paying their suppliers who are in very bad shape. These suppliers may tank and not be able to furnish parts for Ford and that other quaint company. In other words GM may bring down the whole auto chain by itself.
I know people are aware of this problem and hopefully steps will be taken to buffer this stress point if bankruptcy comes to pass.
From my seat over here downunder, I see the bailout as a way to prop up the UAW and their conditions. If you consider how much money they give to the Democrats, you can see why there is an enormous motivation on their side to prop the big 3 up. Why else would democrats be trying to save private enterprise?
I say let them go to hell. It's not as if their production lines and offices and so on will be destroyed by bankruptcy - someone else will come in and take them over. For all we know, GM might be broken up, and we go back to the old days of Pontiac, Buick, Cadillac and so on being separate companies - who knows? Let them go under and allow the market to work it out.
What did Lee Iaccoca do with the bazillions of dollars (adjusted for 2008) that he got the last time we bailed out Chrysler?
How many times we got to do that?
Wouldn't it be cheaper to just buy out the UAW and throw it away?
IIRC, the government guaranteed loans in that earlier Chrysler deal, it didn't actually give Chrysler money. Iaccoca got the company back in the black and paid all guaranteed loans off early. It was after he retired that they got in trouble again.
I'd like an explanation of where all this bailout money is coming from. Our taxes are going to be sky high or we're going to face inflation that will maker Carter look like a piker.
Retread
Seems the UAW hasn't figured out that 80% of something is better than 100% of nothing.
SB: coatia
Land of the Fucked
1. If the job of a Senator is to represent his State, then the State should be paying for his Representation.
2. Congressmen should be paid once a year: for 182 days in Wash DC, including travel time; the sum of which also covers the cost of maintaining that Wash DC office. If the sum is inadequate, then the local legislature is responsible for temporary financial assistance.
3. Sessions of Congress would take place during the period of May to Sep; power for the air conditioning of Congressional common areas shall be paid for by contributions from the individual Congressman pay package.
4. Other suggested solutions may occur ...
Cheers
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